Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Second Quarter 2023 Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to James Lamb, Head of Investor Relations. Please go ahead. Good morning, and thank you for joining us. Today, we will review our second quarter 2023 results. With me are Niraj Shah, Co-founder, Chief Executive Officer, and Co-chairman, Steve Conine, Co-founder and Co-chairman, and Kate Gulliver, Chief Financial Officer and Chief Administrative Officer. We will all be available for Q&A following today's prepared remarks. I would like to remind you that our call today will consist of forward-looking statements, including, but not limited to, those regarding our future prospects, business strategies, industry trends, and our financial performance, including guidance for the third quarter of 2023. All forward looking statements made on today's call are based on information available to us as of today's date. We cannot guarantee that any forward-looking statements will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Our 10K for 2022, our 10Q for this quarter, and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events, or otherwise. Also, please note that during this call, we will discuss certain non-GAAP financial measures as we review the company's performance, including Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow. These non-GAAP financial measures should not be considered replacements for and should be read together with GAAP results. Please refer to the Investor Relations section of our website to obtain a copy of our earnings release and investor presentation, which contain descriptions of our non-GAAP financial measures and reconciliation of non-GAAP measures to the nearest comparable GAAP measures. This call is being recorded, and a webcast will be available for replay on our IR website. I would now like to turn the call over to Niraj. Thanks, James, and good morning, everyone. We're excited to reconnect with you today to share the details of our second quarter results. Last year, we laid out a plan to strengthen our business that included a path to sustainable and growing profitability with several key milestones. For the past few quarters, you've seen us execute against that plan to lower our costs, focus on the basics, and earn more customer and supplier loyalty, and you've seen the tangible impact of this plan as our performance has continued to improve. I'm pleased to share today that we've passed one of our key milestones and are reporting positive Adjusted EBITDA and positive free cash flow. This is in combination with a return to momentum in our top line, with positive year-over-year order growth and sequentially higher active customer count, all while investing into initiatives for future growth. This is how we ran the business for our first decade and how we'll continue to do so going forward, profitable while investing for growth. We think we are now in a very exciting place, having scale while remaining ambitious and entrepreneurial. We plan to take full advantage of this. Our work over the past year to drive more than $1 billion of run rate savings in our cost structure is playing out across our entire P&L, enabling our accelerated return to positive Adjusted EBITDA and comes in tandem with our efforts to see improvement in our top level KPIs. Order growth is the leading indicator of our other major KPIs, and even as average order values normalize towards pre-COVID levels due to deflation, we expect to see net revenue return to positive year-over-year growth in the third quarter as our active customer count continues to climb sequentially. We're going to handle this earnings call in a slightly different format than usual, because, as many of you know, next week we will be hosting our first Investor Day. We'd encourage all of our investors to tune into the live stream, which will begin at 1:00 P.M. Eastern Time on Thursday, August 10th. We'll be using this as an opportunity to introduce you to more members of our leadership team, dive deeper into the core pillars of our business, and take you through the major growth initiatives for the years ahead. Through that lens, today, we're going to keep our prepared remarks concise, to leave more time for questions about this quarter's results, so that we can turn our full attention to our long term strategy and key growth drivers next week. Now, let me give you a view of where our business stands as we move through the summer. Q2 proved to be a quarter of two continuing themes for Wayfair: share capture and cost efficiency. I'll start with the share capture piece. The results really speak for themselves. Wayfair meaningfully outperformed the competition this spring, with net revenue down 3% year-over-year in Q2, compared to a category that continues to be down 10%-20% for widely tracked estimates, like credit card and email receipt data. Our team spent significant time at various trade shows over the past few months, and we have heard resounding feedback from our suppliers that the platform they want to lean into is Wayfair. Benefits of our enormous marketing reach, considerable merchandising investments, and proprietary logistics capabilities make Wayfair an unparalleled partner to our suppliers. Since last fall, we have seen strong market share capture on the back of our core recipe. The combination of broad availability, fast delivery, and sharp pricing continues to be a powerful flywheel to drive both customer and supplier engagement. Across the board, we're setting new benchmarks on these metrics. Availability and speed badging continued to climb in Q2, and with further wholesale cost normalization, as well as our operational cost savings efforts, we now consistently see ourselves as a price leader across our most popular items. Our recipe is back intact. We've been extremely encouraged by the recent data we're seeing on customer behavior, with a noticeable upswing across all of our customer cohorts and sequential growth in our active customer count. It's crucial to know that this improvement in order momentum is not a function of isolated success in any particular class or with a specific group of shoppers, but has been broad-based across both our customer file and our catalog. We see this as an important point of validation for our customer acquisition strategy, which looks to build lifetime shoppers who make Wayfair a core part of their shopping habits. We approach earning customer loyalty through many vectors. Our work around promotions is a great example. In this environment, our promotional activity is a marketing lever that piques customer curiosity and draws them to visit. Once on the site, they purchase a variety of promoted and non-promoted products. In fact, during sale events in the second quarter, non-featured items drove over two-thirds of our gross revenue. It's worth noting that in our customer survey work, we've seen no change to the share of shoppers that indicated they would only shop Wayfair during a sale. As we do across every facet of the business, we're continuously testing these levers, measuring the results, and iterating. For example, earlier this summer, we ran a series of promotions to encourage shoppers to use our app, we saw remarkable engagement. Mobile app revenue hit its largest-ever share, and we saw App Store rankings reach the highest they have been since the pandemic due to significant lifts in downloads. This is just one exciting way we're growing engagement with our app, key loyalty, and free traffic driver. At the outset, I mentioned two themes for this quarter: share capture and cost efficiency. we've talked at length about share capture and the major driving factors. I want to touch on cost efficiency briefly before passing it over to Kate, who will talk through this theme in more detail. The second quarter saw gross margins exceed 30%, a milestone we've only previously accomplished during the peak pandemic period of 2020. Unlike three years ago, the improvement in gross margin and its impact on our unit economics is durable, driven by the considerable work our team has done to execute across the set of more than 70 operational cost savings initiatives that we've talked about in recent quarters. Going back to where we started, this highlights a key point from our shareholder letter. Wayfair is at the stage where we can both invest for growth while demonstrating considerable and improving profitability. Q2 was a quarter where we were able to achieve Adjusted EBITDA margins of over 4% while also leaning into growth initiatives. I'm excited to talk more about our ongoing growth opportunities at our Investor Day next week. We continue to lean into physical retail, including opening two stores this summer, to invest into our international business and to pursue new technologies like generative AI, to name just a few areas. You'll hear a focus on the opportunity ahead to growth, as well as a continued commitment to operational discipline and expanding profitability directly from the senior leadership team that's driving us there every day. Thank you. With that, let me turn it over to Kate for a review of our financials for the quarter. Thanks, Niraj, and good morning, everyone. We've got a lot of exciting progress to report from this quarter, so let's jump into it. Net revenue for the quarter came in at $3.2 billion, down 3.4% year-over-year, but up 14.3% from Q1, following a more traditional seasonal pattern. While we had a slow start to the spring weather, the outdoor shopping season picked up rapidly as we moved through the back part of the quarter, and we saw both customers and suppliers leaning into several well-received promotional events. Niraj spoke at length about the growth we saw in order volume, both year-over-year and quarter-over-quarter, which came in conjunction with continued deflation in AOV as we lapped some of the peak periods of inflation last year. The top line success we saw in Q2 was driven in large part by the U.S. segment, which saw net revenue come in 15.3% higher than Q1. I'll now move further down the P&L. As I do, please note that the remaining financials include depreciation and amortization, but exclude equity-based compensation, related taxes, and other adjustments. I will use the same basis when discussing our outlook as well. Gross margin had an outstanding quarter, coming in at 31.1%. This is the highest gross margin we've ever printed as a business, and as Niraj discussed, comes not from an unusual surge in demand, but from structural improvements we've been driving across our operations.... We're pleased with the results our operational cost savings initiatives have produced so far, but do want to note that this quarter exceeded even our own expectations, with some timing benefits flowing through in the period. It's worth reiterating that we have been thoughtful about the share of these savings we reinvest in the top line as we navigate the consumer environment, and we'll continue to take a very tactical and dynamic approach to balancing this mix through the remainder of 2023. Before moving to advertising, I'll quickly mention customer service and merchant fees, which showed nice leverage this quarter, coming in at 4.3% of net revenue, a reflection of our cost reduction efforts from earlier in the year. Advertising had another strong quarter at 11.1% of net revenue for the period. As we've discussed at length over many quarters, we are being prudent about driving higher efficiency from our paid channels in the face of depressed, free, and direct traffic. We ran several in the second quarter. These tests provide key insights that inform our channel mix going forward. They also drove outperformance on the advertising line in Q2 and will correspondingly leave some revenue on the table for the third quarter as we held back spending in various channel segments. This is a perfect example of the sophistication we bring to advertising, which is one of the areas we'll focus on during our Investor Day next week. You can look forward to a much deeper dive into how we think about managing our channel mix and efficiency targets as part of that event. Our selling, operations, technology, general, and administrative expenses totaled $473 million in the period. While we are seeing nice quarter on quarter progress in this line item and significant year-over-year reduction as a result of our cost actions over the past 12 months, we continue to monitor this cost area closely. This quarter, we did see some lower than anticipated attrition. While it's a near-term headwind, on the whole, this is something we're pleased with. We've seen considerable excitement among our team members in the past three months as the success we've had with our customers and suppliers resonates throughout the business. The revenue strength, in conjunction with the considerable cost action we've taken across our entire P&L, led to Adjusted EBITDA of $128 million for the second quarter, a 4% margin on net revenue. Our U.S. segment saw Adjusted EBITDA come in at $161 million for a 5.8% margin, while international losses showed further compression to negative $33 million of Adjusted EBITDA. We ended the quarter with $1.3 billion of cash and highly liquid investments on our balance sheet, and over $1.8 billion of total liquidity when including our revolving credit facility capacity. Net cash from operations was $217 million, offset by $89 million of capital expenditures, which resulted in free cash flow of $128 million for the quarter. We're thrilled with this progress. As you know, our free cash flow is driven by three components: Adjusted EBITDA, working capital, and CapEx. Adjusted EBITDA was a strong contributor this quarter, as was working capital. We saw healthy sequential revenue growth, which is a driver of cash flow to our business, given our negative cash conversion cycle. I'll get into guidance momentarily, but in the lens of typical seasonality, we would not expect working capital to contribute meaningfully to cash flow in the third quarter. Let's now turn to guidance for Q3. Quarter to date, gross revenue has been trending positive, low single digits year-over-year, and we would expect net revenue growth in the mid single digits for the full quarter, in part weighed by the impact of the advertising channel tests I mentioned previously. As we've shared before, we intend to continue to invest some of our cost savings in the customer experience as we maximize multi-quarter gross profit dollars. Therefore, we expect gross margins between 29.5%-30.5% for the quarter as we balance the ongoing structural improvements in gross margin and optimize for investment into the customer experience. Moving on to customer service and merchant fees, this line should once again be between 4% and 5% of net revenue. We would expect advertising to be between 11.5% and 12.5% of net revenue, a bit above Q2, given the factors I mentioned before around our testing cadence in the early summer and our continued efforts to drive efficiency across our channel mix. We forecast SOTG&A or OpEx, excluding equity-based compensation and related taxes, to come in between $460 million and $470 million. This largely follows the trajectory we laid out last quarter, adjusted for the timing impact of the lower attrition rate in the second quarter. If you follow the guidance outlined above, we would expect to have positive Adjusted EBITDA margin in the low single digit range for Q3. This implies a third quarter margin slightly lower than Q2, given the overperformance on gross margin and advertising in the quarter, but shows a clear trajectory toward the sustainable mid-single digit Adjusted EBITDA margin and positive free cash flow we've outlined in the past. To that last point, you should expect the more modest EBITDA dollars in Q3 and some sequential compression on net revenue translates to a free cash flow figure that is roughly break even, ±. Let me touch on a few housekeeping items for the third quarter. Please assume the following: equity-based compensation and related taxes of roughly $150 million-$170 million, depreciation and amortization of approximately $102 million-$107 million, net interest expense of approximately $5 million-$6 million, weighted average shares outstanding of approximately 116 million, and CapEx in an $80 million-$90 million range. As I wrap up, I want to take a moment to recognize how far we've come. A year ago, we first discussed the shape of what our path to profitability would look like, and messaged a plan for break-even Adjusted EBITDA by the end of 2023. Today, we've achieved that goal, driving over $1.4 billion of cost actions across the business to reach our profitability milestone months earlier than planned. Last August, we reported an Adjusted EBITDA loss of $108 million. This quarter, on a revenue basis that is approximately 3% smaller, we've driven $128 million of positive Adjusted EBITDA. Of course, our tremendous progress wouldn't be possible without the dedication and commitment of everyone on the Wayfair team. We're thrilled to introduce you to the leaders of that team next week at our Investor Day and showcase everything that makes Wayfair special. As we've outlined before, we remain committed to driving meaningful growth while improving profitability and free cash flow generation, and are excited about the future. Thank you. Now, Niraj, Steve, and I will take your questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Please limit yourselves to one question and one follow up. We'll pause for a moment to compile the Q&A roster. The first question is from the line of Christopher Horvers with JPMorgan. Please go ahead. Thanks, and good morning, everybody. My first question is, as you think about the promotionality that you had in the first half of the year, we get a lot of questions on whether that promotionality is driving, you know, any sort of unsustainable market share gains. Can you, can you talk about that, especially in the context of how you're thinking about balancing some of the gross margin investment versus the outperformance that you saw in the second quarter? Sure, Chris. Thank, thanks, thanks for the question, good morning. On promotions, I think the, I think the way to think about it is promotions are really more a marketing message than, you know, than, like, a pricing strategy. When you think about, like, you're commenting about being unsustainable. The way that I think to think about is, in this period where promotions have been a more frequent occurrence, the bulk of the volume is still not the items on promotion, just like it is in a normal time where the promotional cadence is a little less strong. The difference in the frequency of promotions is less about needing to discount to drive volume, a little more about what marketing messages resonate with the customers. When you think about sustainability, we think the momentum we have in the business is very sustainable, and we also think that prices, as we kind of get to a fully normal environment, will actually be lower than they are today, because the inflation that's coming out still has a little ways to go before it's fully out. When you kind of think about from a customer value proposition standpoint, I think your question gets at like, "Hey, are you offering prices that you're not going to be able to offer in the future?" We don't think that's the case. We, we feel quite, quite good about it. The other thing on market share I would just point to is, the market share gains we're getting are from pretty much across the board. They're not coming on the back of any particular customer or any particular product category or segment. It's very broad-based, and I think what it shows you is that our recipe is back intact, which is the breadth of selection, the fast delivery, the, you know, the kind of availability of the best sellers. These were things that were under strain in that COVID period, where, you know, supply chain congestion was there, a lot of inflation was there. What we're seeing is that as the recipe is fully intact, this is the cycle that we've just used to compound our business over the 20 years, and that's what's driving the success here. Then my follow up question is, as you flip here early to free cash flow, in the second quarter, Kate, can you help us think about how you think about use of cash and how you think about sort of the, the debt structure and the balance sheet structure over a longer term basis? Yeah. Thank you. Good morning, Chris. So a few thoughts there. Obviously, we are very excited by the free cash flow generation this quarter, and we intend to, you know, continue to be at a sort of sustainable free cash flow generation place going forward. As far as the overall capital structure, as, as I think you're aware, we have a number of converts. The first convert is that 2024 convert of about $117 million remaining. We feel very good about our ability to manage through that. The next convert is that 2025 convert of about $755 million remaining. As we go forward, we think there'll be multiple structures, for us to manage that convert as well. When we look at a balance sheet, we feel very good about our position today, and we intend to, you know, keeping free cash flow generative and adding that back. Our next question is from the line of Maria Ripps with Canaccord. Please go ahead. Great. Good morning, and thanks so much for taking my question. First, can you maybe just talk about some of the competitive dynamics that are happening in the space, given sort of all the recent developments? It seems like you've been clearly gaining market share. How do you see sort of the competitive landscape developing here going forward? ... Thanks, Maria. Yeah, so I, I think as we've referred to in the past, we have many competitors, so this is a very fragmented category. Inside home, there's even many subcategories that would have a different set of competitors, whether you're looking at a segment of furniture or you look at something like lighting or plumbing, you, different competitors will come to mind as you go through those different categories. We're excited that we're taking share, and we're taking share very broadly, so it's not coming from any particular set of competitors. I think the big thing in the landscape of what you see in e-commerce is that it's primarily the larger platforms are the ones that are able to really compete. When we look at competitors, you know, in the United States, the main competitors we would watch the closest are the larger ones, you know, the Amazon, Walmart, and Target, Home Depot and Lowe's, you know, Costco. Those folks have the scale to participate in offering advanced logistics. They have the scale to reach the customers, and these are things that if you're much smaller, that it's, you know, as, as we've talked about, you know, having, you know, around about 3,000 engineers, product managers, data scientists, or you talk about the, you know, 25 ish million sq ft of logistics space we have and all the different types of specialized operations we run, including our own proprietary large parcel delivery. These are things that you just can't do without scale, and I think these are things that offer the customer an experience that they are, you know, increasingly getting accustomed to and, and require or desire, in order to buy from you. So, you know, each competitor that we watch focuses on different segments of the business. They take advantage of their scale to do that, whether they're delivering building materials to job sites or whether they're delivering groceries to consumers. We focus on home, and so we've used our scale for that type of specialized, you know, capabilities. I think the smaller folks are the ones that are losing share in a way that's gonna be ongoing, because I think it's harder in e-commerce to provide that value prop, if you don't have the kinds of assets I just referenced. Got it. That's very, very helpful. Just on gross margin, could you maybe just talk about how much of the operational savings you have achieved are being sort of reinvested back into price, how, sort of, how that may have influenced the top line out performance this quarter, and how should we think about the percentage reinvested kind of on a go forward basis? Yeah, Maria, let me just share a couple quick thoughts, and I'm going to pass it over to Kate to get into the more, the specifics on the numerics that you, you just asked for. The one thing I would highlight is, you know, we laid out an ambitious plan, and as we go along the plan, we keep adding to it. We, you know, the operational cost savings have been tremendous. There's, there's still more to come. I would say that from a price standpoint, we're also, part of the reason we're doing really well is we, we are very competitive on the key items that we offer, and a lot of that is because we're back to a normal environment where we have the strength to do that. Kate, maybe you have anything you want to add? Yeah, I, I think Niraj covered most of it on our philosophy here. Maria, as you know, last quarter, we referenced that $500 million that we had originally outlined. We said we'd already achieved half of that by last quarter, or sort of coming out of that quarter. Obviously, you saw ongoing improvements and, in fact, an acceleration on that gross margin line. You know, I think you can infer from that, that we picked up continued operational cost savings and in fact, a little bit faster than we had intended to. As we think about, you know, the reinvestment, what we're really balancing is flow through on that to the bottom line with improvements in the customer experience overall, and that's really designed to generate multi-quarter growth profit dollars. That's how we're thinking about that ongoing investment. You, of course, you know, see that a little bit in, in the guide on gross margin, which is, is up obviously, but takes into account some of that investment. Your next question is from the line of John Blackledge with the TD Cowen. Please go ahead. Great, thanks. Two questions. First, could you just talk about key, key drivers of, of, of the order, growth, and is that sustainable over the next several quarters? Just any general, color on, the consumer demand for the home category. Second question on Gen AI, just potential uses of, of Gen AI, to drive the biz going forward. Thank you. Thanks, John. Let's start with the order growth. The order growth dynamic, I think it's, it's what I was referring to earlier about us, you know, being in a position where the recipe is back intact and the offering, the breadth of selection, the in-stock availability, the fast delivery, the competitive prices. That flywheel is there, customers are reacting to it. What's even more exciting than that is we're seeing it in the repeat metrics. We're seeing their engagement post order, the coming back post order, the buying again, working. That's a cycle that compounds, and everything in the business would imply that that should be a something that grows over time, because then the customers will come back. That's a compounding factor as you add in more, you know, engaged customers. As I mentioned on the pricing standpoint, the prices, can get even sharper as suppliers are able to fully move to kind of the future cost. On, you know, where the inflation has come out, the ocean freight is, is not what it was at the peak. You know, it's much more like what it was pre-COVID, you know, et cetera. So that's sort of the dynamic, and that's why you see the momentum in the business, and you see it growing. I don't know, Kate, on the order growth, anything you'd want to- Yeah, I think those, those are the key pieces. I mean, it, it's really the dynamic that I believe we foreshadowed a few quarters ago, which is as deflation continued to come out of the prices and as our availability and speed got better, we would ultimately be seeing, you know, order growth offset some of that deflation as customers were able to, to reengage in the category. And the- I think your next question was. Gen AI. Was on Gen. Yes. Yeah. Yeah, a couple of thoughts on that. There's a, there's a number of use cases of Gen AI that we're actually already taking advantage of and building capabilities on and honing, a lot of which have to do with reducing workload or making work much more efficient. An example of something that we actually have already piloted is, you know, as you know, we have thousands of customer service agents who talk with our customers, but also engage with their customers on chat and answer questions via email. Something like chat and email, one of the things that we, we've done is run a pilot where, we have software that basically creates what it believes the answer to be. Then with that answer, an agent can review it very quickly, edit it as they think is needed, and send it back. That's a cost savings method that actually increases the quality of the answers. We found that actually, the customer satisfaction, the accuracy of responses go up, while in fact, the cost, you know, the cost to answer a given question goes down. There's, like, four or five use cases like that, that we already have underway. Some of the other ones have to do with how we draft up product descriptions, how we do product tagging. So there's a variety of things that we do, you know, that we have, you know, tremendous amounts of people or cost involved that we can reduce, and while improving efficiency and accuracy. There's a set of activities around GenAI that get to sort of how it could change the customer experience in the future. I think those are the ones that are a little more in pilot stage and a little more R&D is involved. We announced one of the things we're working on just the other day, was Decorify. I just encourage you to, you know, if you're curious about that, to just check that out, because there's a link available to that, and you can just try it yourself, and it gives you a, a taste and a feel of what's available and where things are headed. We think that will take longer to play out than some of the cost savings type things that we think we can ramp more quickly. We think that the power of some of what you can do with GenAI is very significant, and I think it plays to our strength, where we've been very actively using data science for years, and this is sort of the latest incarnation of that. It plays to a strength that we've had, and so we feel like we're in a very good position to, you know, continue to be a technology leader and, you know, aggressive adopter of technology. Thank you. Your next question is from the line of Alexandra Steiger with Goldman Sachs. Please go ahead. Great, thank you for taking my questions. I do want to ask about international. While you obviously saw a nice improvement in the U.S., international growth is still lagging. Wondering if there's anything you're calling out, whether you refocused your international efforts or deprioritized some initiatives that led to the lower revenue growth, or is this more a sign of a weakening consumer demand in international versus the U.S.? Thank you. Thanks. Thanks, Alexandra. What I would say on international, sort of there's two, two parts to answer that question. One certainly is, the macro is different by country, and there are, I would say, in some of the markets that we're in, in our international segment, certainly a weaker macro than in the United States. I think that's a piece of it. I think the other piece of it, though, is when we laid out the $1.4 billion in cost actions, one of the buckets we talked about, for example, was some of the things we were doing around advertising, and where we were gonna make sure that any advertising we did, we kept it really tight inside paybacks and some of the, some of the more speculative advertising we cut back. One of the other things we talked about is, like, in, you know, how, you know, the being tight on unit economics. In some of the international segments, I would say that we've taken a position to strengthen our unit economics, which comes at the cost of near-term revenue, but we think fundamentally sets up those businesses in the longer term to be much stronger. You see that when you look at the EBITDA of the international segment, you can see that it's improved dramatically. Some of those things, while they would hurt on revenue, they would be quite good from a profit standpoint. You take a longer term view, it creates a much better outcome. That, that's the other thing I think you need to make sure you keep in mind. It's not just the story of the macro. Great. Thank you. Very helpful. Your next question is from the line of Curtis Nagle with Bank of America. Please go ahead. Good morning. Thanks for taking the question. The first one, I guess, would be on the pace of active, active customer growth. I think you saw the first instance of quarter-over-quarter growth in something like two years. Where is it coming from? Is it new? Is it reactivated? And, you know, how should we think about the pace, you know, going through the rest of the year? Kurt, thanks for the question. Yeah, I, I think we're very excited about that momentum. You know, I think if you, you know, if you think about orders, you know, the order growth is significant, that shows you that there's a lot of customers who are getting To your point, some are new and some are reengaged, but you see them coming. Then what I was addressing earlier is something that you can't see in the metrics but is happening, and we're very excited, which is the repeat metrics underneath. Someone who buys, you know, what percentage of them buy again in the next 30 days or 90 days? You know, these types of repeat rates. Those are actually strengthening quite nicely, and that's a really good leading indicator of where the business is headed. It's kind of for two reasons. One is that creates a compounding cycle. Mathematically, that's how growth really gets strong, stays strong, and increases. Also it shows you the, the, the, the kind of how well are we doing at impressing the customer. In other words, you know, if you have great selection, great pricing, great delivery, great merchandising, you know, they'll buy. Then ultimately, once they buy, they get the product at their house, it's been delivered to them, they then have the product, and they're using the product, only then, if they're really happy, would they buy again. Those repeat rates kind of take everything and kind of show you where the customer is then voting, how happy are they, and are they then acting on that? We're seeing that strengthening. Kate, I don't know anything... Yeah. I would just add, I, I think that, that speaks to it very well. I would add that, as a reminder, the active customer number is an LTM active number, and so you're gonna see the orders number, as we are seeing, improve ahead of that active customer number. You'll see that sequential growth, which, you know, to your point, we saw this quarter, and those indicators will come first, and then it'll take a little bit of time to sort of grow through and get to that positive active customer number. Overall, we're very encouraged by the trends, particularly around order volume, and as Niraj said, sort of underlying repeat behavior. Got it. Okay, just as a, a quick follow up. The commentary in terms of, kind of the relative share gains from 2Q, were, were definitely helpful. I guess, you know, at the end of the quarter, maybe going into 3Q, any evidence that you're seeing a pickup in the category or, you know, just sort of a continuation of you guys really outperforming, you know, if that's a primary driver of, 3Q? Yeah, I, I would say, a few thoughts. Based on what we see from a market share standpoint and what we see overall demand in the category, we're seeing it kind of. We don't really see the category particularly strengthening. We see it kind of bumping along. We believe we see that in both the credit card data that we have access to, but also, you know, for example, the last few days, I was at the Las Vegas Market and talked to a lot of suppliers, it's what we're hearing from them. We're hearing from them that we're picking up share, it's broad based, and then any given supplier will give us some flavor about named, specific name competitors. What we're hearing would be consistent with the, what we believe we're seeing in the credit card data. Then what they're telling us about their overall demand trends would be consistent, which is demand is relatively weak, it's bumping along. We're a standout in taking share, and it's very broad based. Okay. Thanks. Very helpful. Your next question's from the line of Steven Forbes with Guggenheim Securities. Please go ahead. Good morning, Niraj, Kate. Good morning. I think I wanted to start with CastleGate penetration. Curious if you can give us any color on where you expect to end the year in terms of penetration of small and large parcels, and what the current thoughts are around capacity for CastleGate as we look out to 2024 and 2025? Yeah, thanks for the question. What I would say is that CastleGate penetration, as we go through time, we're, we're, we're quite excited about where we think it will go, based on what we're hearing from suppliers' interest to flow goods in as they've increasingly flown new goods out of Asia. We've been at a period of time where suppliers are kind of working their way through excess stock, but they're now getting to a point where they're, they're bringing in their best sellers. You know, I mentioned the Las Vegas Market recently. I'd say that a substantial number of the suppliers are now bringing in large new product introductions for the first time in three years. It's sort of like a moving forward thing going on in the business, which is particularly exciting, I think plays to our strengths. Also, you know, from the standpoint of flowing fresh goods out of Asia, that, that'll speak to increasing CastleGate penetration. From a capacity standpoint, what I would say is, you know, we've built that network out over the last few years to have a very good footprint, but with a lot of unutilized space, because the idea we had is we wanted to have the footprint, and then as we get more volume through it, it will then get utilized, which will then be a situation where we'll only need to add new locations down the road when we have capacity constraints, which is not the case right now. Yeah, I, I, I would add to that. You know, we've obviously shared the CastleGate penetration stat in the past. It's one metric on our overall logistics improvements and ongoing efficiency that we're seeing there, which you can clearly see in that gross margin line. And we'll certainly speak next week at our Investor Day, more broadly to our logistics network and the efficiency and the value that drives for our customer and our supplier. CastleGate is an important piece of that, and within CastleGate, of course, the penetration is a component, but there are multiple factors at play here. Appreciate that. Maybe just a quick follow-up, and maybe we'll get this next week, but, yeah, I keep thinking back to the total logistics cost, right? I think you've referenced in the origin in the past, around $0.20 of every dollar. Curious if you could sort of talk to where that, where the total logistic costs are today, and where you sort of see them going, as, various aspects of the supply chain normalize here. Yeah. You know, I don't have I don't have, like, a crisp number to share, the 20 is now X or anything like that, but I guess the way to think about it is that logistics cost, we've been focusing on optimizing it. The biggest factors that would optimize it are basically, when you think about CastleGate penetration, it's if goods come in directly from wherever they're manufactured and get forward-positioned from the get-go, that's the single biggest driver of taking out logistics costs because all the excess miles that would need to happen in the destination country really get minimized. That's the most expensive leg, is the final mile leg. The second most expensive thing is also, is around, on that final mile, how can you optimize it past just the miles? So, you know, this is where we get into what we do in some of our buildings around sortation and where you can take out things like hub touches. You can also, for the large parcel items that we deliver ourselves, how do we optimize that? Then again, you know, whether you do 17 deliveries in a day instead of 16 or something like that, it can be a very big driver of cost. So if you think about the activities we have around the fulfillment center footprint, around the consolidation, and then the things we're doing abroad that facilitates the ocean freight to be very efficient at loading to begin with, and then what we're doing on our last mile delivery network. These things kind of add up to tackling those costs. You know, one of the things I mentioned is where we have capacity past what we use today. As volumes increase, there's a tremendous opportunity to drive down costing, and that will happen as, as the volumes grow and the volume in that network on a proprietary basis grows. Your next question's from the line of Jonathan Matuszewski with Jefferies. Please go ahead. Good morning, thanks for taking my questions. One of your online competitors is highlighting elevated trade down over the last couple of months, with customers who used to buy better SKUs, buying more good SKUs. Would you say trade down was more pronounced in 2Q relative to 1Q, and how much did that impact your AOV this quarter? Thanks. Yeah, thanks, John. I would say that we're definitely-- we, we definitely see trade down. Trade down in, in a recessionary cycle, trade down is very common, and, you know, I-- we kind of saw that cycle play out in 2009, 2010. It's, it's a very-- it's actually relatively easy to kind of quantify that cycle and track it. That said, the bulk of what's driving the AOV is that deflation. It's that ocean freight, in particular, inflation coming back out. There's also a little bit that had to do with raw materials and some of the production costs. So that's the primary driver of AOV, the vast majority of it. Trade down is a piece on the AOV, but it's not the, it's not the, it's not the bulk of it. Yeah, I would, I would just add that I think also, trade down is an area where our broad selection benefits us, and so the customer can continue shopping with us, and if her budget is tighter, she can still find that product with us. We certainly saw that behavior play out, in sort of the 2009, 2010 period as well. That's helpful. Just my follow-up question. Kate, I think you alluded to some investments in customer experience contributing to a lower gross margin, 3Q relative to 2Q. Can you elaborate on some of those enhancements and the returns you expect to see from them? Yeah, great question. When we talk about investing in the customer experience, I think it's important to note that's across multiple factors, right? Often, folks will go to price. Price is a component, but so is delivery speed, delivery experience. Niraj just spoke about some of the last mile delivery efforts that we make, the returns experience, incidence management, et cetera. All of those, we think, drive an overall better customer experience, and that leads to ongoing repeat behavior. When we think about quantifying the value of those investments, we're looking at, as I mentioned previously, this multi-quarter growth in gross profit dollars and ongoing improvements there from driving that customer experience. As a result, yes, we are gonna be reinvesting some this quarter. You know, we landed at 31.1%, midpoint of our guide is about 30%, but we've continued to step up that gross margin, and I think you'll see, you know, ongoing improvements throughout the year and, and going forward in gross margin. We've previously outlined that path to sort of a mid-thirties gross margin. We're very pleased with the progress that we're making there. Your next question is from the line of Anna Andreeva with Needham. Please go ahead. Great. Thank you so much. Good morning, and congrats on the nice momentum in the business. Thank you, Anna. We had a couple of quick ones. I wanted to follow up on the monthly cadence during the second quarter. You guys provided an update in early June for the business to be down mid-single. Was June overall positive for the company? I just wanted to make sure that math is correct. Obviously, a lot of initiatives are working, which is great, but anything specific that drove improvement to low singles that you're currently running, and can you help bridge how we should think about getting to mid-singles for the third quarter? Thanks, Anna. I'll just share one quick thought and then pass it over to Kate to answer your question. One thing just to make sure you keep in mind is this, the concept of compounding, right? You, you get customers, you know, they are interested, they buy, they're happy, and then they come back. There's a bunch of things you can see there that show you that compounding. You know, you see repeat ticking up. You know, our the Wayfair app, for example, has seen increased downloads and usage. That's a typically, the app is used by people who are increasingly loyal and engaged. There's a bunch of different metrics I think you have access to, where you'd see that, and that concept of compounding is really how the, the growth occurs. Let me pass over to Kate for the specific. Yeah, I, I, I think that covers how you can think about the second quarter. Obviously, we don't provide month-on-month breakouts. As you, you know, sort of move into the third quarter, I think your question was, how do we get from low single digits that we're seeing today to that mid-single digit? One factor that I'd point you to is that marketing test. That straddles two quarters, so the test itself occurred in the second quarter. That means we pulled back on some spend in the second quarter and left some revenue dollars on the table that would have hit in the, in the, in the early part of the third quarter. That's a little bit of how you might see some of that, and then, of course, ongoing momentum that we would expect to see because of those underlying factors that Niraj mentioned. You know, orders obviously beget future customers and future orders, and as we've seen that order volume growth, we, you know, will continue to see that flywheel improve. Okay, terrific. That's super helpful. Kate, just as a follow-up, this was very helpful in the gross margin, but did you guys quantify the timing benefit in the second quarter? Thank you again. Yeah, we, we, we did not. We did say things hit a bit faster than originally anticipated, and, you know, we're excited about the ongoing tight execution from the team there. Your next question is from the line of Ygal Arounian with Citigroup. Please go ahead. Hey, excuse me. Good morning, everyone. Good morning. Maybe just to dig in a couple of these points. First, on the gross margins, great to see, and I understand kind of the takes with the reinvestment. On the upside and what drove the upsides of what you were expecting this quarter or just in general, the strength, can you talk about which pieces were the largest contributors to that? Like, what's been coming in better than expected? Then on the advertising, again, really interesting to see and hear about the kind of the pullbacks on the testing. Can you share a little bit more about, what that was, what you saw that led you to pull back, you know, some of the things you're, you're, you're looking for there and how to think about that as we kind of move forward? Thanks. Thanks, Ygal. I, I think, Kate will probably be able to answer your questions, but the one point I just want to make before I pass it over to Kate is, you know, a lot of the gross margin improvement, if you go back to that, $1.4 billion cost action plan, we kind of talked through a bunch of components of what we were planning to do. I think a lot of what you're seeing in the results is an outcome of a lot of the things we said we were going to do that we've then since done, and that, that are kind of driving a lot of the improved performance. Then, you know, on advertising, I guess the point I would make there is, you know, the, the testing we do is really to get data that then we use to hone the data science models that drive the spend in a way where we have high confidence that we know what ROI we're getting. So it's something that we just need to regularly do to kind of hone these models. Because of kind of the unusual behavior during COVID, the last set of tests were run in 2019, which is quite a long time ago. You typically would run them much more frequently than, than, than a 4-year period, but that's sort of the last normal period we had. So what we're doing is making sure we hone these models. Even though that hurt performance from a revenue standpoint in Q2, because you're not spending a bunch of advertising that you believe is productive, it's the only way to get the data back that hones the model. It's more, kind of an ongoing thing you would do to just make sure that you're kind of able to be, you know, very specific and accurate in, in how you advertise. Kate? Yeah. Circling back to your gross margin question, on sort of what was the largest driver there? We've outlined before there's over 70 different initiatives that we are pursuing on the operational cost savings and operational efficiency. What you're really seeing is the combination of those initiatives hitting a bit faster than we anticipated. That's what drove, you know, that, that Q2 gross margin. One thing I'd point out is that many of those are structural improvements that we've made. Those savings are enduring and will be ongoing. The sort of slight, you know, guide at the midpoint being at 30 versus the 31 that we hit is really just because of that reinvestment in the customer experience. We expect the, the improvements to hold. On the advertising test, now, I'd echo everything Niraj just said. You know, these are important things for us to do to be able to have that ongoing conviction in how we spend. We think about spend and efficiency on a channel-by-channel basis, as you've heard us speak about before. Testing is a sort of traditional and appropriate thing for us to do. We're excited to be back on the offensive and able to actually do those tests in a normal cadence. That gives us the conviction to, to, to, you know, spend effectively into those channels going forward. Of course, the, the result is that you do leave a little bit of revenue on the table when you run those tests. Your next question is from the line of Atul Maheshwari with UBS. Please go ahead. Good morning. This is Michael Lasser for Atul Maheshwari. Thank you so much for taking our question. Niraj, I want to give you an opportunity to respond to some of the pushback from the skeptics that we've been hearing. One of their arguments is many of the vendors, really globally, are still heavy on inventory, so they're, they're using third-party marketplaces as a channel to, to still right-size their inventory and then dispose of excess inventory. In addition, they're benefiting from lower freight costs, which is allowing them to be a bit more promotional, which is driving some of the improvement. How would you respond to that? Well, in terms of the deflation that's happening, I, I think that is happening. I do think the freight costs are not likely to revert to those kind of pandemic-type prices that were there. I, I don't think that's a temporal thing, and I don't think that's really promotional. I think that's items reflecting kind of a more normalized cost that will continue, and that's being, I, I think, I think that's true for everybody, right? That, that's like kind of a normal market phenomenon that I, I don't think is specific to any particular retailer. In terms of excess inventory, I'd say the peak of excess inventory was the summer of 2022, and suppliers have been working down that inventory since then. We have a number of suppliers who are back to very healthy stock levels, and we have some who are still trying to work through that excess stock. We have not really seen suppliers discounting in general past the price of what they can price goods at on an ongoing basis. In other words, there's the replacement cost if you float that item today from Asia, what would that cost? We're seeing suppliers price perhaps all the way down to that level, even if they have excess, that they brought in at a higher cost basis, or still be above that level with a plan to get down to that level as they can flow more and more fresh goods. We're not seeing anything that would kind of say any of the supplier behavior is something that's very temporal. What we're seeing is that they're reverting to normal. I think what you're seeing is that, just like in 2019 or 2018, 2017, it's a competitive field of retailers out there. There's a lot of folks doing different things. The folks who provide the customer with the best experience win. That's a little different than the behavior during 2020 and 2021, where there was a very booming market, there was excess demand, there was a lot of stimulus spending, there was a lot of supply chain congestion, there was all kinds of different pricing. That's a more unusual period. I think that we've now got that in the rearview mirror. Okay. Our follow-up question is, you've got a wonderful purview on two of the most important elements of the domestic economy right now, which is the consumer and the housing market. If you could provide a little insight, what you're seeing from a category perspective to illuminate what consumers are interested in buying, where purchase cycles are already normalizing. For example, there are signs that flooring as a category remains under pressure, yet appliance demand is starting to stabilize. What big themes or trends are you seeing that really indicate where the consumer stands right now from a category perspective? Yeah, you know, thanks for that question. I mean, what, what I would say, what we're seeing, you know, obviously, you can see in our numbers, we're seeing nice demand. That demand is pretty across the board. Obviously, we're, you know, a larger player in some categories than in other categories. So something like appliances, as you mentioned, flooring, these would be some of the newer categories we entered into over the last number of years, as opposed to, you know, we started our company in 2002 with a focus on entertainment furniture. So that's the category we've been in by far the longest. So our market position varies in terms of how much market share we have. I think as a result, some of these newer categories we're smaller in, and so we can grow it off of a smaller base. Some of these bigger categories that we're in, we have much more market share, but we can still grow because, you know, of, of such a large position we have. I don't know that we can see in our numbers the category overall performance that you're alluding to. We hear about some of it from our suppliers, so we hear it anecdotally, but it's the same kind of data you would have access to. Today's final question will come from the line of Colin Sebastian with Baird. Please go ahead. Great, great, thanks for fitting me in. Good morning. Just wanted to follow up on AOVs and, and the impact from deflation a little bit more, maybe to understand specifically what you'd expect to happen in, in the financial profile of the business with, with gross margins and operating margins. If we do see a scenario where there's a reversion, maybe back to historical levels. Niraj, maybe part of this may be saved for next week, you know, following up on the Gen AI question or AI in general, on the expense structure, I mean, given some of the crosscurrents around the internal efficiency gains you mentioned, but also external-facing product development and maybe higher infrastructure costs associated with the AI, what should we think about in terms of the impact from those investments in R&D and technology? Thank you. Thanks, Colin. On the AOV question and deflation, I think, you know, I've kind of mentioned before, but I, I think really the main thing that's happened is the ocean freight, which is the primary driver, again, has returned back to sort of pre-COVID levels. Suppliers, as they work through their goods to get to newer goods, they're then bringing those goods over with kind of the costing looking much more like it did pre-COVID than it did during, during COVID. They're reflecting that in the wholesale prices, which then get reflected into the retail prices. You can see from our margin, you know, effectively our, you know, of course, margin is kind of like our take rate. You're seeing that we, you know, that, that, that's holding fine. You're seeing that having a competitive offer really drives customer engagement, which you're seeing in sort of the order count number and the sequential increase in active customers. Then if you roll that forward, you get that effect that I've described a couple of times around that compounding, which happens with engaged customers coming back. That's seen in repeat metrics that I think is the one piece that's hard for you to see. You see it play out over time in results, but you know, you wouldn't have those repeat metrics, but that's how we, we see it, and it's, it's working well. I think the margins become a, you know, margins, you can see our unit economics are strong, and, you know, what you're seeing is that our volume is growing, and it's growing in what's a really tough market today. You can imagine as the market stabilizes and then increases over time as you roll out over the years, like, it makes it easier for us to grow even faster. Yeah. Our margins are healthy and growing, even with the AOV compression. I would not expect, you know, a drag on the margin from AOV compression, as we're seeing that, of course, offset with orders, which is a more positive thing for our flywheel. Then on your Gen AI question, you know, I think the way to think about it, obviously, where we can become more efficient, that, that's a form of cost savings. You know, when we talk, if you think back to that $1.4 billion cost actions plan, there are a lot of different cost savings we said we're going after. You can see, create another set of activities that using Gen AI can help us go after, and that obviously makes us more efficient, lets us offer sharper retail prices, lets us invest in different areas. That's all very productive. That infrastructure cost question you had in there about the kind of technology spend, you know, I wouldn't don't think about us as really incurring that in the same way. The folks who have the big LLMs and provide those as a service, so in, in this case, you know, Google or OpenAI would be two that we work with, for example. They have a very large capital investment they make that they then get back by letting you use their models as a service. You're then putting your own layers on top of it, using your own first-party data, which is then a reason why we and the other large platforms get a benefit that the smaller platforms don't, which is the depth and breadth of your first-party data, which is really the difference in how well you can design a Gen AI type application. But your cost is not particularly high because, again, you're, you're, you're paying it for a you're paying for your usage, which is a modest amount. You know, there, there's always different pieces of our software application where we're adding capabilities, and there's always different pieces you're optimizing lower costs in. I don't know, Kate can maybe address it, but I think it, our cost, there's nothing for you to worry about there, I guess, from that point. Yes, I, I, I think that nothing to worry about in the near term in the cost structure or over time in the cost structure. You know, of course, there should be ongoing cost savings, as Niraj mentioned earlier. As we wrap up, we just want to remind you all of our Investor Day next Thursday. We look forward to seeing many of you there. Thank you for joining us this morning. Yeah, thank you. Look forward to seeing, hopefully, a bunch of you next Thursday. Take care. Thank you all for joining today's conference call. We appreciate your participation. You may now disconnect.